Trading Update

China to Europe drops off of its previous highs, down a further 6 cents, however China to USA remains flat with no price changes (balancing the fortunes of several China to USA OD pairs). Characteristically the remaining lanes are in the red as we descend into 2020, with Shanghai shedding a noticeable 11 cents off of last week. Hong Kong sees a 2 cents tick however this does not represent any significant rate recovery.

Forward curve pricing on both lanes along the front month and Q4 2019 has shown no change, as rolling month to day prices remain in line with forward prices. However 2020 continues to price lower, dropping off 5 cents on both China to Europe and China to USA - this reflects uncertainty in the initial fortunes of the 2020 market.

Market Comment 

With what looks like a settled case for Brexit after a landslide election in the United Kingdom, we might be forgiven in hoping that we've established a grain of certainty for 2020 along at least one of the major trade lanes. It also appears that a number of industry pundits (most noticeably IATA), have forecast flat to positive growth for 2020.

Last week we threw our hat into the ring, focusing entirely on a degrading long term contract market (not just block space agreements) that trickles down all the way from Airlines through to Shippers. The concept of index-linking contracts or offsetting cash-flow versus the open market via derivatives, settled against an entirely independent and accurate index, is now becoming common - certainly this is positive feedback for FIS, as a part of our market development over the past few years. 

All the while we look to the regeneration of the the trans-Pacific market, as trump in his benevolence has been heavily signalling the market that he will draw down Chinese trade tariffs over 2020, presumably in preparation for the US Presidential Election. Whatever the reasons, it may be the case that shippers will want to grab this opportunity to boost inventory from Q2 onwards. As always, nothing is certain, however this sort of erratic policy shift is a precursor to some equally erratic capacity pricing.

Unpredictable as ever, it seems like we are at the bottom of the market - the only way is up. However we must exercise caution in our forecast given most of us got it wrong in 2019 (and 2017, and who knows when else).

Basket USD/KG CHANGE CHANGE % MTD VOL %
CHINA - EUR 3.06 -0.06 -1.92% 3.14 23.19%
CHINA - USA 3.44 0.00 0.00% 3.46 24.90%
Blended USD/KG CHANGE CHANGE % MTD VOL %
PVG/EUR 2.86 -0.11 -3.70% 3.00 29.99%
HKG/EUR 3.25 -0.02 -0.61% 3.27 33.21%
PVG/US 3.31 -0.02 -0.60% 3.31 30.08%
HKG/US 3.57 0.03 0.85% 3.63 35.90%
Global USD/KG CHANGE CHANGE % MTD VOL %
Air Index 2.39 0.00 0.00% 2.40 44.29%
Lane Pairs Spread Ratio
CHINA - EUR vs USA 0.38 8.55%
HKG vs PVG - EUR 0.39 7.83%
HKG vs PVG - USA 0.26 13.23%

Forward Curve - Indicative Update

FIS AFFA, CHINA - EUROPE | USD/KG
  BID ASK VALUE CHANGE
Dec-19 3.10 3.18 3.14 0.00
Q4 19 3.10 3.18 3.14 0.00
Cal-19 3.10 3.18 3.14 0.00
Jan-20 2.78 2.90 2.84 0.00
Feb-20 2.66 2.86 2.76 -0.02
Cal-20 3.00 3.10 3.05 -0.05
FIS AFFA, CHINA - USA | USD/KG
  BID ASK VALUE CHANGE
Dec-19 3.40 3.48 3.44 0.00
Q4 19 3.40 3.48 3.44 0.00
Cal-19 3.40 3.48 3.44 0.00
Jan-20 3.21 3.35 3.28 0.00
Feb-20 3.28 3.48 3.22 -0.02
Cal-20 3.15 3.35 3.25 -0.05